First Affirmative’s shareowner advocacy program does not stand alone. Many of the asset managers we use in client accounts are also our partners in advocacy—and they have powerful stories to share. In this installment, we talk with Stu Dalheim, Vice President, Shareholder Advocacy, Calvert Investments.

Calvert Investments has a large footprint—but we are not talking about carbon. This footprint is in the form of a shareowner advocacy program backed up by over $13.5 billion in investment assets. Calvert offers what is perhaps the broadest-based selection of SRI investment strategies in the industry. They have also now integrated environmental, social, and governance (ESG) factors into the analysis process for their array of “traditional” fixed income funds—thus bringing all of Calvert’s managed assets into the positive impact arena.

The Courage to Go First

Soon after the company opened its doors in 1982, it became apparent that the firm’s advocacy program would distinguish Calvert Investments as a leader on a broad base of advocacy issues. They quickly racked up an impressive list of “firsts.” Calvert was the first mutual fund manager to file a shareholder resolution tied to a social issue. More recently, Calvert was the first mutual fund company to sign the Montréal Pledge committing to measure and publicly disclose annually the carbon footprint of their investment portfolios.

Integrating Research and Advocacy

Stu Dalheim points out that while Calvert has always been committed to evaluating corporate performance on ESG issues, “…reporting to the Principles for Responsible Investment has focused our efforts in accomplishing a deeper integration of ESG goals throughout our portfolios and a more enhanced disclosure of the process. Calvert has a dedicated team of sustainability analysts. These analysts not only do research, but are also involved in advocacy efforts… Calvert seeks to determine which issues are material to a particular company and find financial value in ESG. There is regular communication between the portfolio managers and the research analysts, with ESG input informing portfolio decisions.”

ESG Research as Gatekeeper

Dalheim reflects on the research team’s dual function: “The research team serves as gatekeeper,

Thought Leadership determining the acceptable list of companies from which [portfolio managers can] choose. The team then provides ongoing analysis, providing input on ESG practices that inform buy and sell decisions… One of the big challenges is to communicate this distinction to clients and how to show the clear value proposition that ESG analysis can provide.”

Calvert uses the expertise of its team in research efforts that inform the advocacy work not just of Calvert, but of all activist managers. According to Dalheim, “Calvert conducts extensive research both on their own and in cooperation with other investors and networks such as Ceres. The goal is to highlight best practices and provide a yardstick by which to judge companies and industries. These reports serve as a bridge between research and advocacy, and serve as a platform for effective engagement with companies.”

A perfect example is the Power Forward research report series. Dalheim says that “these reports provide a blueprint for companies, investors, and policymakers for setting emission goals, increasing energy efficiency in a profitable way, and leveraging investments in alternative energy. The research provides information on what companies are already doing and who should be targeted for advocacy work.”

While some companies see the value to setting emission goals and investing in energy efficiency, other companies take more convincing: “Some of the objections we hear are typically: ‘We would be doing it already if sustainability mattered.’ Or, it’s ‘just too complex.’ Part of the power of these reports is showing companies that they don’t have to be experts in renewable energy to capitalize on the benefits.”

“Capital costs might seem intimidating upfront, but there is much evidence that this spending can pay off quickly. One example is IBM saving a cumulative $477 million through its annual energy conservation actions. Citigroup exemplifies leadership. They just announced a $100 billion commitment to investment in clean energy; this after already meeting a previous $50 billion goal set in 2007.”

Denial is a more difficult hurdle: “Some companies don’t want to acknowledge that it’s about climate change. It becomes a political objection. Companies miss profitable opportunities because they don’t want to acknowledge the reality of climate change.”

Shaping Public Policy

Dalheim believes that the research can be equally impactful in the public policy arena: “The Power Forward 2.0 report clearly shows that there are consequences for states in how they set renewable energy standards and policies. In states where the debate is occurring, this report can have much influence. Facebook, American Express, and Google are just a few examples of companies that have favored states with more progressive policies supporting renewable energy when choosing where to build facilities. The influence reaches the federal level as well, since the EPA rules depend on state implementation.”

Shaping the Advocacy Agenda

Stay tuned as Calvert harnesses the power of this report this advocacy season: “We used the report internally to set resolution targets. For example we filed at Dillards, a retailer that has done some energy efficiency work but does no renewable energy. If Dillards is assuming it is not cost-effective, we can use this research to show them that that’s not true. We hope that it opens eyes to the possibilities.”

At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?

Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.